Week ending 1 May 2020
Against the backdrop of the Covid-19 crisis and a country on lockdown, TPR has published its annual funding statement for schemes with a valuation date between 22 September 2019 and 21 September 2020. The Regulator recognises that March/April 2020 valuations will be particularly challenging. Many trustees will not have sufficient information to form a reliable view on their employer’s covenant and affordability at the present time, nor on the expected future level of long-term returns from their scheme’s assets. TPR suggests that trustees could consider delaying decisions about key assumptions until they have more clarity, but instead look initially at a range of different scenarios.
The 10 tables showing the key risks and actions to take, which reflect the sponsor’s covenant strength, the maturity of the scheme’s liabilities and the strength of the existing technical provisions and recovery plan, have not changed from the 2019 statement. Of course, the covenant of the sponsor may well have deteriorated over the past year. The Regulator warns trustees to be particularly vigilant of employer covenant leakage.
TPR also notes that the second consultation on its new DB funding code will be delayed until 2021.
TPR has also published guidance on communicating with members, with a view to helping them avoid making hasty decisions at this uncertain time. A template letter has been provided for trustees to send to DB members who are considering a transfer out. This warns the member that it is unlikely to be in their best interests to transfer. The letter is jointly signed by the Regulator, the Financial Conduct Authority and the Money and Pensions Service. The guidance also covers members stopping contributions, pension scams and DC investment market volatility.
Just Group has agreed three pensioner buy-ins with two schemes totalling £226 million. The largest buy-in was for £160 million with the Leonardo Electronics Pension Scheme and was completed in March 2020. The other two deals (£49 million and £17 million) were for the NG Bailey pension scheme.
In the news this week, there are two DB scheme closures, changes to the Coronavirus Job Retention Scheme and the FCA publishes new rules on pension transfers whilst the CMA reminds trustees about their compliance statements
Given the very company/scheme-specific impact of the Covid-19 pandemic, in this quarter’s Arena we simply show all the usual financial and investment analysis for what was a very turbulent first three months of 2020, plus a summary of key pension developments and Company pensions news over the quarter.
Over the autumn of 2019, BAC conducted an extensive survey of the actions which companies are taking to manage their defined benefit (DB) and defined contribution (DC) pension arrangements.
2019 marked 50 years since Neil Armstrong walked on the moon and this was obviously on the Queen’s mind in her Christmas message as she talked about a bumpy year but one with small steps of progress as well. In terms of pensions, it also felt like a year of small steps and occasional bumps. In this quarter’s Arena, we take a positive look back at 2019, as well as looking forward to some expected pension developments over 2020.
Despite the very different circumstances facing individual companies, bac‘s autumn 2019 survey reveals a surprisingly consistent picture of the actions which companies are finding most attractive to manage their DB and DC pension arrangements.
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